In reviewing the December 31, 2011, inventory Schaefer discovered errors in its inventory-taking procedures that have caused inventories for the last 3 years to be incorrect. The company only discovered the issue after making the 2010 year-end entry to adjust inventory and cost of goods sold. The errors are as follows:
- 12/31/2008 Understated $16,000
- 12/31/2009 Understated $19,000
- 12/31/2010 Overstated $ 6,700
Prepare the journal entries necessary at December 31, 2010, to record the above corrections and changes.
2. For each situation, indicate specifically how this error affected the financial statements and how the correction or adjustment would be presented in the 2010 financial statements.